Thursday, December 13, 2007

Income Distribution

1) 100% to emergency fund (until at least 3 months expenses)2) 100% to pay off high-interest debt3) 401K to point of company match4) monthly contribution to a “big ticket fund”, which is savings for occasional large expenses, like semi-annual insurance, vacations, etc.5) Roth IRA to contribution limit6) 401K to contribution limit7) remainder: 50% mortgage prepay and 50% taxable index fund

I have #1 and don't have #2. I am already doing #3. The line between #1 and #4 is fuzzy. I guess any liquid asset I have over 3 months expense is automatically part of #4. I'm already doing #5.

I have not been doing #6, instead I have been putting down money for mortgage prepayment. I am still forming a plan of what to do with the leftover after #5. That post at getrichslowly.org has a lot of insightful comments that I have not gone through completely yet.

While my goal is to increase my net worth by $100K in 1.5 years, I have to balance it with long-term interest too.

About Me

I am an early 30 years old software developer working in financial industry. I live and work in a Virginia suburb within Washington DC metro area with my wife, who is a corporate CPA. We journey through the world of personal finance together. I do the steering, and my wife do the managing.
Our interest in PF started in 2001 when our net-worth was $30K in credit card debt. We had to learn and apply fiscal discipline, have a strong determination and be willing to eschew instant gratification to dig our way out of the debt.
We have come a long way since, but we do not forget what we have learned and are eager to learn much more.